Top Banks Added to Enron Hit List

Barclays and other top financial institutions are to be added to the hit list of an expanded class action suit in connection with the Enron collapse, it was announced today.

William Lerach, the lead attorney in the case, said the banks' knowledge of questionable partnerships and financial vehicles gave them an inside view of Enron's financial condition as they sold securities to investors.

"Every bank bears significant complicity for their involvement," Mr Lerach said. The banks named in the suit are Barclays Bank, JP Morgan Chase, Citigroup, Credit Suisse First Boston USA, Canadian Imperial Bank of Commerce, Bank of America, Merrill Lynch, Deutsche Bank and Lehman Brothers.

Original defendants included current and former Enron officials who sold more than $1bn in stock from October 1998 to November last year and Arthur Andersen, Enron's former auditor.

The $25bn lawsuit was originally filed in December on behalf of large investors, including the lead plaintiff, the University of California, which lost $150m after Enron collapsed last December.

Lawyers for the board of regents at the university alleged in the 502-page complaint that the banks and securities firms participated with Enron in a scheme to deceive shareholders and investors by helping the energy company with bogus deals to inflate profits.

The expanded lawsuit also lists 24 Andersen partners, including Joseph Berardino, the former chief executive of Andersen Worldwide, the international umbrella network for Andersen. Andersen in the US has been charged with obstruction of justice by the US justice department for shredding thousands of documents.

The lawsuit names Andersen's offices outside the US in the UK, Brazil, Cayman Islands, Puerto Rico and India.

The lawsuit could pose even more problems for any potential buyer of those offices as they may inherit those legal liabilities, although Andersen Worldwide has denied any legal exposure of offices outside America.

Mr Lerach said subsequent investigation pointed to liability on the part of banks that were Enron's lenders and underwriters before alleged accounting abuses exposed last year led to the company's meltdown in America's biggest bankruptcy.

Barclays provided loans of $251m to special purpose vehicles at the centre of the Enron scandal. The financing was provided by Barclays' investment banking division, Barclays de Zoete Wedd, in 1997 and was used to help the venture Chewco to acquire assets from Enron.

Barclays has maintained that the loans were straightforward and that it has done nothing wrong.